Applied Rationality focuses on public policy issues and tries to take a liberal perspective that is consistent (comments to the posts will often show otherwise) with neoclassical, rational-choice economics.

Tuesday, March 25, 2008

As the Iraq war enters its sixth year and as the nation mourns the 4,000th service death in that war, the Bush administration is sending yet another of its Iraq promises down the memory hole. This one tells you all you need to know about the quagmire in Iraq.

Announcing the troop surge in January 2007, President Bush told us that his then-new policy of increasing troop levels and holding the Iraqis to a strict set of benchmarks would "hasten the day our troops begin coming home" and said that "the Iraqi government plans to take responsibility for security in all of Iraq's provinces by November." He also faulted his critics--the Iraq Study Group, Congress, and most of the American people--who wanted a draw-down rather than a build-up in U.S. forces, saying that such a course "would result in our troops being forced to stay in Iraq even longer."

As we now know, the benchmarks that were the lynchpin of this strategy were abandoned within a few months. And by September, President Bush announced a new policy of "return on success," that is, U.S. troops would return home as conditions permit.

For the last few weeks, the President and Vice President, along with the Republican presidential candidate, Sen. John McCain, have been touting the many "successes" in Iraq. Apparently though, there is not enough "success" to allow forces to return in meaningful numbers. The New York Timesreports that the President is planning to keep troop levels through 2008 at or above their pre-surge levels.

Since the surge was announced, we have known that it could not continue past this spring. The military was stretched to its capacity. Without extreme measures such as a draft, there simply aren't enough forces to maintain the extra troops in Iraq. The modest troop reductions that are occurring now reflect that underlying constraint. They are reductions from the height of the unsustainable surge, not reductions from our pre-surge levels. Thus, we can't move forward with more troops, even if that were a worthwhile policy.

In remarks last week, the President said that "gains we have made are fragile and reversible." Indeed, with Iraqi civilian casaulties rising through the first three months of this year, it appears that the security gains from the surge--the only measurable improvement of the policy so far--are being reversed. Now we are told that another critical outcome, the return of troops, is unlikely to occur. So, we can't move backward either.

Success should mean that Iraq is moving closer to assuming responsibility for its own security. However, the Iraqi government will be no more capable of maintaining security this November than it was last November or the November before that. The surge was supposed to be an investment toward a permanently secure and democratic Iraq. Instead, it has just dug us deeper into the quagmire, with genuine success appearing to be as illusive as ever.

Friday, March 7, 2008

The Bureau of Labor Statistics released its February 2008 job numbers this morning; the news wasn't good.

From the survey of business establishments, seasonally-adjusted non-farm payrolls dropped by 63,000, the second monthly decline. From the survey of households, seasonally-adjusted employment dropped by 255,000.

The seasonally-adjusted unemployment rate fell (you read that right) from 4.9 to 4.8 percent. The fall is largely an artifact of the way that unemployment is calculated--as the ratio of unemployed people to people "in the labor force." The survey data indicated the number of people in the labor force shrunk by nearly half a million people. The rate is also an artifact of seasonal adjustment; the unadjusted unemployment rate is 5.2 percent.

However you cut them, these are pretty dreary numbers, especially coming on top of weak numbers from December and January. And regardless of whether the economy has plateaued or dipped downward, workers appear in for a bumpy ride.

Wednesday, March 5, 2008

The Board of Governors of the Federal Reserve System released the latest installment of its Beige Book, a summary of economic reports from the 12 districts that make up the system. The Beige Book gives an early look at economic conditions around the country. The current report is very downbeat:

Reports from the twelve Federal Reserve Districts suggest that economic growth has slowed since the beginning of the year. Two-thirds of the Districts cited softening or weakening in the pace of business activity, while the others referred to subdued, slow, or modest growth.

While the report avoids the "R" word, it should be noted that the last two reports have cited ever-slowing growth and GDP growth over the period covered by those reports was an anemic 0.6 percent. Further slowing strongly suggests that the country has tipped from net growth to net decline.

Other indicators from the economy are also downbeat. Indicators for manufacturing and service sector conditions showed declines last month, and two private job reports also showed declines.